27.09.2022: Building institutions such as GST Council takes time and patience: Nirmala Sitharaman

India’s Finance Minister Nirmala Sitharaman on September 26 called out the opposition parties that have been opposed to and criticizing the goods and services tax (GST) regime.

“Institution building takes time… to trash it is very easy,” Sitharaman said at a News18 Townhall in Chennai. “Some of us probably will have a greater level of patience, some may not but institutions need patience.”

India adopted the GST in July 2017. The indirect tax system pools the sovereign rights of the Centre and states to tax.

At the time of introduction of GST in 2017, the constitutional amendment provided for compensation to states for five years for revenue lost. The GST Compensation to States Act provided for release of compensation based on 14 percent year-on-year growth.

Several states have been demanding the continuation of GST compensation that ended on June 30. The Centre has been noncommittal.

Some state finance ministers, notably Tamil Nadu’s Palanivel Thiaga Rajan, have suggested that the tax system needs an overhaul. PTR has said that if the GST Council is truly a federal body, it must decide whether states should be compensated for any revenue shortfall. Thiaga Rajan also sees a need to review the GST as a whole as its construct “leaves a lot to be desired”.

After its last meeting at June-end, the GST Council was due to meet in early August but that meeting has yet to take place.

Sitharaman said that the GST was constituted by a panel of state ministers which was led by West Bengal’s Asim Dasgupta, who came from an opposition party.

When asked whether Southern states were being discriminated against in the devolution of funds as defined by successive finance commissions, the finance minister said that the issue had been addressed to an extent.

But she also quipped “Will a country prosper if we constantly draw this kind of artificial line?”

Source: MoneyControl

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